Fitch affirms SA’s credit rating but notes concerns
Fitch Ratings on Wednesday affirmed South Africa’s investment grade credit rating but pointed to concerns about political and fiscal stability.
Fitch noted that the BBB- rating reflected South Africa’s low trend GDP growth, significant fiscal and external deficits and high debt levels.
A statement from the ratings agency said South Africa’s GDP growth remained low compared with its peers, with five-year average GDP growth at just 2.2 percent.
It said the country’s economic growth was likely to slow to 0.7 percent this year before recovering to 1.5 percent in 2017. Reasons given for slowing growth included constrained electricity supply, concerns about the deteriorating investment climate and fractious labour relations.
The statement pointed to questionable political and fiscal stability, evidenced by the dismissal of two finance ministers in a week in December last year and subsequent tensions between the new finance minister Pravin Gordhan and other parts of the government.
Fitch noted expectations that the governing African National Congress might lose some support in local elections on August 3.
In affirming the country’s investment grade status, however, the rating agency said that political risks in South Africa were balanced by strong policy institutions, deep local capital markets and a favourable government debt structure.